Buyers circle former Ward's building, 550 W. Washington

(Crain's) -- The investment market for downtown office buildings is coming back to life, jolted by the record-setting $655-million sale of 300 N. LaSalle St.

The group that owns the office portion of the former Montgomery Wards Catalog Building at 600 W. Chicago Ave. is considering putting the property up for sale after receiving several unsolicited offers, confirms New York lawyer Victor Gerstein, a member of the group.

The group is said to be mulling whether it can get $425 million, or nearly 42% more than the $300 million the group paid in 2007. The vacancy rate is just 4% in the nearly 1.6 million square feet of office space, compared to about 15% three years ago.

Boston-based Beacon's asking price could not be determined, but the 16-story structure is expected to attract strong interest from prospective buyers because of its relatively small size and the financial strength of its largest tenant, CME Group Inc., which has two-thirds of the building under a long-term lease. The building might sell for about $110 million, according to one estimate.

A spokesman for Beacon did not return a call requesting comment.

The downtown Chicago market has received renewed attention since last week, when a Southern California real estate investment firm confirmed it had agreed to buy 300 N. LaSalle St. for a recordbreaking price of $503 a square foot.

Two office buildings are already on the market: 353 N. Clark St., which could sell for $500 million, and 550 W. Jackson Blvd., where the owners are seeking $140 million.

"There is a pent-up amount of capital which is slowly shifting to Chicago from the East and West Coast cities," says Kenneth Szady, executive director in the capital markets group of real estate firm Cushman & Wakefield Inc.

In May, Beacon agreed to sell a controlling interest in 1350 I St. N.W. in Washington, D.C., for about $211.6 million, or $581 a square foot, according to real estate research firm CoStar Group Inc.

The group that owns 600 W. Chicago is "considering bringing it to the market," says Mr. Gerstein, a partner in law firm Gerstein Strauss Rinaldi LLP. Real estate firm Holliday Fenoglio Fowler L.P. is advising the firm on its next steps, and a sale is not certain, he adds.

"We're happy with the deal (600 W. Chicago)," he says. "If we end up holding it for the next 10 years, we'd be more than happy." He declines further comment.

Office space occupies the southern portion of the Wards building, while the rest of the hulking, 2.2-million-square-foot structure has been converted into residential condominiums.

While the office vacancy rate is just 4%, the total amount of available space is 12.1% when sublease space is factored in, according to real estate data provider CoStar Group Inc.